Is IPR an exception to Competition Law?

Intellectual property rights are the rights given to the person for their intellectual labor. It basically confers exclusive rights on the author/producer or inventor regarding the use of their product for a certain period of time. In simple terms, we can say intellectual property rights prohibit all other persons from using the work without obtaining any prior consent from the IP rights holder. Competition law is the legislation that ensures fair competition in the market by regulating anti-competitive practices. These two concepts are usually seen as contradictory to each other. This is because IPR grants exclusive rights to the IP rights holder which restricts the accessibility of such work by the public. Whereas, competition law seeks to promote competition and accessibility in the market. Simply said, IP protects individual interests, whereas competition law protects the market. So, here the question arises, is IPR an exception to competition law?

INTERLINK BETWEEN IPR AND COMPETITION LAW

The relation between IPR and Competition law may seem contradictory to each other but in reality, it is not. With time, the idea of IPR is not only limited to giving exclusive rights to the IP rights holder, rather it emphasizes promoting innovation and creativity under competitive trade practices. For better understanding, we can take the example of Comparative Advertisements. Comparative advertising is a type of marketing in which a company attempts to present its products and services as superior to those of competitors through comparison. We all remember the advertisement for Horlicks where they claimed their drink better than Complan. As per section 29(8) of The Trademark Act, 1999 “A registered trademark is infringed by any advertising of that trade mark if such advertising—

(a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters, or

(b) is detrimental to its distinctive character; or`

(c) is against the reputation of the trademark.”

Similarly, Section 36A(x) of The Monopolies and restrictive Trade practices Act, 1969 also contains a similar provision that declares a trade practice to be unfair when it gives “false or misleading facts disparaging the goods, services or trade of another person.”

Further, if we consider Section 9 of The Trademark Act,1999, registration of mark indicative of kinds, quality, geographical indications, etc are prohibited. The intent behind such prohibition is to restrict monopoly rights over the name of the public domain to ensure fair trade practices.

In light of the above provisions, we can say IPR and Competition law are not completely contradictory to each other and converges at the point of fair trade practices. This reconciliation of IPR with Competition law ensure free and fair competition in the market.

WHAT DOES TRIPS SAY?

TRIPS “Trade-Related Aspects of Intellectual Property Rights” which is an international agreement formed by the WTO to set out certain standards of protection for intellectual property in different member countries also dealt with the issues of unfair competition and trade practices of the IP rights holder. The agreement basically introduced two methods to prevent the abuse of IP rights. 

• Compulsory Licensing – As per Article 31 of the Trips Agreement, the government can authorize someone else to produce or sell the IP-protected products without the consent of the owner if the reasonable requirement is not fulfilled. Compulsory licensing is an important tool to deter the concentration of intellectual property on one hand and made it accessible to the public at large. For instance, we can take the example of the Corona vaccine. What if the producer of the Corona vaccine doesn’t want to share their products with the general public or wanted to charge a price that is not affordable to the general public. In such a case where IP right holder put any unreasonable restrictions to curb the accessibility of their product, the government has the option to authorize the other person to produce or sell that product under the concept of compulsory licensing so that it can be made accessible to the public at large. 
• Parallel Imports – It refers to the process of legitimately acquiring IP-protected products and selling them to unauthorized markets at lower prices. This concept is based on the principle of exhaustion which says when a patented product is first introduced to the market, the patent holder’s exclusive right to import it is exhausted and expires. The government uses this method to increase the accessibility of certain products in the local market if such product is not available or affordable in their country. For ex- Cost of medicine Zolgensma by Novartis is 18 crore in India while in the U.S.A it is sold at the cost of 10 crores only. Therefore, under parallel import, the Indian government could import Zelgonsma from the U.S.A without the Novartis consent. In this way, the government prevents the IP rights holder from putting any unreasonable restrictions against the accessibility of IP-protected products.

WHAT DOES THE COMPETITION ACT SAY?

If we analyze the statutory framework of the Competition Act, 2000, section 3 states “No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India” In simple terms, it restricts the business entities from entering into any agreement that will have an adverse effect on the free and fair competition of the market. However, section 3(5) of the act talks about the exception. It bestows blanket exceptions over the rights granted under intellectual property law. But, if we read section 3(5) with Section 4, it explicitly says, “No enterprise shall abuse its dominant position.” Therefore as per Competition Act 2000, IP rights holders are allowed to enjoy exclusive rights over their intellectual property till the time it is not misused. Once it gets misused, competition law comes into play.

Indian courts of justice have been dealt with a plethora of cases where the interface of IPR and Competition law discussed explicitly. One of the first cases was  “Aamir Khan Production Private Limited vs The Director-General” , wherein, the High Court of Bombay held that the Competition Commission of India has also jurisdiction to hear IPR matters. In the case of “Valle Peruman and others Versus Godfrey Phillips India Limited”, the court dealt with the misuse of a trademark. Wherein, the owner of the trademark manipulated and distorted the image of its mark to give a false impression. The court observed this as an amount to unfair trade practices of trademarks. Taking India’s competition policy into account, the court stated: “all kinds of intellectual property have the potential to infringe the competition”. The court further went on to say that a trademark owner is entitled to use the mark subject to the restrictions set forth when the trademark was granted. Further, in the case of “Kingfisher vs Competition Commission of India”, The court ruled that Section 3(5) does not limit an IP rights holder’s ability to sue for violation of copyright, trademark, patent, and other intellectual property rights. The Indian Competition Commission has been given the authority to handle any cases brought before the Copyright Board. As a result, the application of other laws is prohibited under competition law. The Competition Commission in this case of “FICCI Multiplex Association of India vs United Producers Distribution Forum” dealt with the question of whether the Competition law affects the right of the copyright holder? The court observed that rights given under the copyright act are not absolute rather statutory rights. Hence, it should be according to the competitive practices of the market. The Supreme court in the case of “Entertainment Network (India) Limited vs. Super Cassette Industries Ltd”explicitly observed that “the charge of royalty through an issue of license for the copyright owner is not an absolute right. if the patented product is priced very high then it will directly contradict the competition law but because of this license would be canceled.”

Considering the above case laws, it can be deduced that Competition law and IPR are not contradictory but complementary to each other. Usually, people think competition law checks monopolistic rights, hence it’s against the principle of exclusive rights of intellectual property. However, in reality, the objective of competition law is to prevent anti-competitive practices and not monopolies. Therefore, we can say competition law does not interfere with the exclusive rights of the IP rights holder but only regulate such rights, So, it can not be abused.

CONCLUSION

In light of the above discussion, there is no doubt that aims and objective of IPR and Competition law are in a similar direction and are complementary to achieve free and fair competition in the market. IP encourages innovation, which as a result encourages market competitiveness. However, even though they are complementary to each other, these two realms of law do contradict at some points. There’s a need to construct a middle path to reconcile features of IPR and Competition law in a way that their objectives converge with each other.